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In this article, I will feature one specialty chemicals company that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

The Sherwin-Williams Company (NYSE:SHW) engages in the development, manufacture, distribution, and sale of paints, coatings, and related products to professional, industrial, commercial, and retail customers primarily in North America, South America, Europe, Asia, and the Caribbean region.

(click to enlarge)

Insider selling during the last 30 days

Here is a table of Sherwin-Williams' insider activity during the last 30 days.

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Robert WellsSVPFeb 25-267,576No17,826 shares29.8%
Steven OberfeldSVPFeb 2534,419No95,262 shares + 8,123 options25.0%
Allen MistysynVPFeb 241,792No18,009 shares9.1%
Robert DavissonPresident, Paint Stores GroupFeb 246,293No26,412 shares19.2%
David HodnikDirectorFeb 211,337No12,172 shares9.9%
John MorikisCOOFeb 1438,623No105,033 shares26.9%
Timothy KnightPresident, LACGFeb 1428,950No37,536 shares43.5%
Thomas HopkinsSVPFeb 1315,373No57,862 shares + 1,377 options20.6%
Sean HennessyCFOFeb 1330,623No92,332 shares + 1,377 options24.6%

There have been 164,986 shares sold by insiders during the last 30 days.

Insider selling by calendar month

Here is a table of Sherwin-Williams' insider activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
February 2014164,9860
January 201400
December 201312,7500
November 201318,0000
October 201300
September 201300
August 201300
July 201300
June 201300
May 201310,1910
April 20137,4980
March 201362,9290
February 20138,4240
January 201300

There have been 284,778 shares sold, and there have been zero shares purchased by insiders since January 2013. The month of February 2014 has seen the most insider selling.

Financials

Sherwin-Williams reported the full-year 2013 financial results on January 30 with the following highlights:

Revenue$10.2 billion
Net income$752.6 million
Cash$744.9 million
Debt$1.7 billion

Outlook

Sherwin-Williams' guidance is as follows:

Q1/2014FY2014
Net sales growth7%-12%8%-13%
EPS$0.95-$1.15$8.12-$8.32

Competition

Sherwin-Williams' competitors include E. I. du Pont de Nemours and Company (NYSE:DD) and PPG Industries (NYSE:PPG). Here is a table comparing these companies.

CompanySHWDDPPGIndustry Average (Specialty Chemicals)
Market Cap:19.78B61.23B26.83B2.43B
Employees:N/A64,00041,40041.40K
Qtrly Rev Growth (yoy):0.110.050.140.02
Revenue:10.19B35.94B15.11B2.52B
Gross Margin:0.450.370.430.29
EBITDA:1.33B5.87B2.28B425.80M
Operating Margin:0.110.120.120.10
Net Income:752.56M2.84B1.03BN/A
EPS:7.265.1822.272.21
P/E:27.3912.748.7015.89
PEG (5 yr expected):1.741.891.931.90
P/S:1.931.691.771.09

Sherwin-Williams has the highest P/S ratio among these three companies.

Here is a table of these competitors' insider-trading activities this year.

CompanyInsider buying / sharesInsider selling / shares
DD097,145
PPG0160,927

DuPont and PPG Industries have also seen intensive insider selling during the last 30 days.

Conclusion

There have been nine different insiders selling Sherwin-Williams, and there have not been any insiders buying Sherwin-Williams during the last 30 days. Seven of these nine insiders decreased their holdings by more than 10%. Sherwin-Williams has an insider ownership of 0.80%.

There are 11 analyst buy ratings, eight neutral ratings, and one sell rating with an average price target of $198.29. Before going short Sherwin-Williams, I would like to get a bearish confirmation from the Point and Figure chart. The three main reasons for the proposed short entry are relatively high P/S ratio, bearish analyst price targets, and the intensive insider-selling activity.

Source: Sherwin-Williams: 9 Different Insiders Have Sold Shares This Month